• Honolulu County: 2010 VA Loan Limit =$700,000 (2009 Limits - $783,750)

• Hawaii County: 2010 VA Loan Limit = $625,500 (2009 Limits - $625,500)

• Kauai County: 2010 VA Loan Limit = $625,500 (2009 Limits - $775,000)

• Maui County: 2010 VA Loan Limit = $625,500 (2009 Limits - $681,250)

You would think that the the new loan limits are in direct correlation to the median sales prices in those particular counties, but we found a few anomalies that contradict this as referenced below:

According to City-Data.com, below are the median sales prices for a house or condo in 2008 (most recent numbers I could find):

• Honolulu: Median Sales Price = $606,800 , 2010 VA Loan Limit = $700,000

Now check out the relationship between median sales price and 2010 VA Loan limits for the following three counties:

• District of Columbia: Median Sales Price = $474,100 , 2010 VA Loan Limit = $768,750

• Fairfax, VA: Median Sales Price = $427,679 , 2010 VA Loan Limit = $768,750

• Pitkin, CO: Median Sales Price = $308,174 , 2010 VA Loan Limit = $1,094,625

Now keep in mind that these median sales prices are for 2008, but really, has the values in these counties gone up that considerably since (if at all)?

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The Dilemma

The levee was built relatively recently, so that just means we have to get it accredited in time. This shouldn’t be a big deal, right? I did some digging to find out, and here’s my understanding of the issue thus far…

I was able to contact the City & County NFIP (National Flood Insurance Program) Coordinator and he provided me a good overview of what’s happening.

1) In preparation for the deadline, the City & County first had to determine which would be the best organization to prepare the levee certification report and documentation. The Army Corps of Engineers designed and built the levee, so it was determined that they would be the most appropriate body to perform the work.

2) However, in order for the corps to be engaged in the project, both the City & County and the Federal Government have to put up matching funds, sounds easy enough, right. How much could this cost anyway? This is where it gets tricky. The C&C has appropriated funds…excellent : ), but hasn’t yet been able to secure the matching federal funds. The amount is relatively small ($30,000), but without it, the levee will not be able to be accredited. The C&C has tried contacting Senator Inouye, but to no avail at this point.

3) FEMA has a deadline of February 1, 2010 for the accreditation package to be turned in. At that point, if the necessary documentation is not turned in (or the levee is not shown to comply with the regulations), the re-mapping process will begin. If the C&C can provide proper documentation before the new map revision goes into effect (to show the levee can be accredited), then the re-mapping can be put on hold. Because of the time needed for FEMA to review all the claims from across the country, the C&C NFIP estimates that there is about a one year window between the February deadline and the remapping. So, the levee certification package will need to be completed within that time period.

Based on our brief conversation, it didn’t sound like they had been making much progress with Inouye’s office, but he didn’t expand on that too much.

Taking Action

I put a call in to Mazie Hirono’s office, the person that I spoke with was unaware of the issue, but was going to escalate the issue and have someone give me a call. That was late last week, but I haven’t received a call yet, so my guess is that it isn’t high on the radar despite the fact that it will affect several hundred homes at the very least.

I am assuming at this point, that none of our representatives on Capitol Hill are actively working on the issue nor do I believe they are aware of it.

As for what we can do, I suspect the best course of action would be any push to raise awareness of the issue to our representatives in congress. Hopefully I hear back from Representative Hirono’s office and they’ll have some advice as well.

For those of you ready to concede, there is a way to sneak in ahead of the new Flood Insurance Rate Changes. It is called, “Grandfathering” and here’s how it works in this situation. The National Flood Insurance Program has “grandfathering” rules to recognize policyholders who built in compliance with the flood map in effect at the time of construction or who maintain continuous coverage (http://www.floodsmart.gov/floodsmart/pages/flooding_flood_risks/grandfathering.jsp). So, if you own in that area, it may be time to obtain flood insurance now, while you are not considered to be in a ‘high risk’ flood zone. Soon you may be.

The Math

Higher Flood Zone = Higher Costs for Homeowners > Increased Rents > Less Money for Kailua Residents > Decreased Home Values.

It appears that the new annual premium will be $1634 - about $140 a month (building only coverage for the maximum of $250K, no contents). Let’s see…by looking at the expected flood map revisions, all of Coconut Grove will be affected. My first guess was that about 300 houses would be affected, but then I had the brilliant idea to take a look at Google Earth and it looks like there are easily 1000 homes that would now be classified as high risk flood zones. Now, let’s do some simple math. What is 1000 times $1634? Hmmm, that’s about $1.6 million cost to homeowners in the first year!!!!! Not to mention that the additional cost for flood insurance will make it more expensive to live in Coconut Grove - which of course will affect overall values in this area ($140/month in additional cost translates to roughly $25,000 in buying power).  So…let’s contact Hirono, Inouye and Akaka, send them a link to this blog post and ask them to find the $30K we need to get this fixed.

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As you can imagine, this new feature, which which has been available in other mainland and foreign markets but only available in Hawaii as of last Monday, has major implications for home buyers scouting out their upcoming home purchase. There are already great web services that provide online MLS listings for Hawaii, but the pictures used in these applications are images provided by the listing agent as well as an aerial view supplied by online map provider such as Google or Microsoft. Now the aerial views are great, but it doesn’t give you the “curb appeal” of a particular property and you can bet the seller’s agent will only show images that display the property in the best possible angles which could be deceiving.

This is where Street View adds a whole new dimension to real estate search. Simply type in a specific address in Google Maps and when Google Maps pinpoints the address with the aerial view, click the “more” link located under the address on the left side of your screen. You’ll notice that the “Street View” link will appear. Once you click this, the aerial image will then be converted to the street view image. You can also enable the Street View feature by dragging the orange peg-man icon to anywhere on the map and instantly it will open up the Street View image.
View Larger Map

Of course Street View will raise red flags for those who have Big Brother phobia. To alleviate privacy concerns, Google has blurred faces and license plates and even allows for homeowners to report a problem by clicking a link on the bottom right corner of the image (too bad these guys didn’t get the message).

If you’re like me, you must be curious how Google was able to compile such a huge database of Street Views? Well, as I found out, they enlisted the help of very smart people with sophisticated technology. Have fun with Street View. It is a game changer in the Real Estate market.

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This new version of the tax credit is part of The Worker, Homeownership, and Business Assistance Act of 2009, and extends the credits through purchase contracts dated April 30, 2010 or prior; however, the transactions must close by June 30, 2010.

Here’s a quick summary of the new version of the tax credit:

$8000 First Time Homebuyer Tax Credit:

• First of all, let’s define a First Time Homebuyer - someone who has not owned a principal residence in the three years prior to the qualifying purchase. This is important…for married couples or multiple parties involved in the transaction, all parties must be a first-time homebuyer. These restrictions are unchanged from the previous version of the bill.

• The tax credit is only available for purchases of $800,000 or less…I know, that’s pretty restrictive…aren’t most first time homebuyers looking in the $1-$2Million range???

• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly (the previous income restrictions).

• This is new! - For homes purchased after November 6, 2009 and on or before April 30, 2010 (closed by June 30, 2010), single taxpayers can have incomes up to $125,000 and married couples are allowed up to $225,000 to qualify for the full tax credit.

$6500 Move Up/Repeat Homebuyer Tax Credit (this is all new stuff!):

• Now, let’s define an eligible ‘move up’ or ‘repeat’ Homebuyer - The homebuyer(s) must have owned and lived in their previous home for five consecutive years out of the last eight years.

• The tax credit is only available for purchases of $800,000 or less…I know, here in Hawaii, this may actually be somewhat restrictive for repeat buyers.

• Again, single taxpayers can have incomes up to $125,000 and married couples are allowed up to $225,000 to qualify for the full tax credit.

Lastly, and possibly, most incredibly, your tax credit can be purchased from you so that you don’t have to wait for your credit. The cash from the sale of the credit can be used to you cover closing costs or be used as a down payment. I don’t know of any entities doing this yet, but if someone claims to be doing so, they may not be crazy.

For more information and FAQs, check out this site or take a look at the simple IRS tax form (5405) that you would use to claim your credit.

So, rejoice quickly, there’s not much time to waste. You now have about six more months to find and put an offer on your dream home. Get crackin’!

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Here’s what I found out:

There can be good and bad implications of the falling dollar, I guess it all depends on your perspective, or the rules of economics (whatever they may be…).

The scary pundits are the ones that I hear most often; and they are saying that the declining value of the dollar means:

• Inflation is coming - if the dollar is worth less, then everything is going to cost more, which is the definition of inflation. This will be true for imports, but for goods and services created in the US, this is more of a long term expectation. The fed monitors inflation closely and hasn’t seen much evidence of inflation rearing its ugly head yet. They have actually mentioned being worried about deflation.

• Increased Fuel Costs - A declining dollar means that internationally traded commodities, like oil, become more expensive. Higher oil prices lead to higher gas prices and then…inflation or worse, stagflation, if the price of oil rises so high that it slows the economy. We last saw stagflation in the late 70’s and early 80’s…ouch!

• Reduced Demand for US Bonds - If the dollar gets too weak, foreign investors may refuse to buy U.S. government bonds, forcing interest rates up and possibly applying the brakes to any recovery.

• The dollar will lose its popularity - Compared to other world currencies, the dollar will lose it’s popularity and people will stop investing in the US and place their money elsewhere.

The other side says, “it’s not scary it’s a blessing!”

There are a few experts that say the decline in the dollar is a good strategic plan and will benefit the USA.

They say a weaker dollar will:

• Increase Exports - Lowers price of US goods overseas, hopefully reducing the trade deficit and increasing our economy with foreign purchases. This is a strategy that China used in their rise to economic power. They have been accused of keeping their currency low for many years to keep their goods low priced and to generate an influx of cash from the rest of the consumer world.

• Shift purchases towards goods made here in the good old USA - A weak dollar will raise the price of goods from outside the country and should make the price of American produced goods more attractive in comparison. This will also help stimulate our economy out of the current doldrums.

• What declining dollar??? - The dollar’s decline is a good media story, but it may be overstated, it is about the same value as 14 months ago. Then, the world financial markets fell into ruin and the world engaged in a “flight to quality” run by investing in the US, still the world’s most stable economy. This drove up the value of the dollar. Now that the world is recovering, money is flowing back out of the U.S. taking us back to where we were 14 months ago. Combine the recovery of the rest of the world and our lower dollar allows us to use other countries buying power to stimulate our own economy.

My Take

It’s all part of a balancing act, when we reach one side of the pendulum, the forces it creates help swing us back the other way. For what it’s worth, I believe we are in the middle of a new shift and what has people scared is a belief that the dollar will plummet with no end in sight. The benefits that the weaker dollar creates will help mitigate its effect and eventually swing us the other way. As long as the economy still needs stimulation, mortgage rates should remain low, but once it heats up, rates will rise to keep inflation in check.

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Home builders, Realtors and the Mortgage industry mounted an aggressive campaign during the recent congressional recess.

The expansion — or, at a minimum, extension — of the $8,000 first-time-home-buyer tax credit is at the top of the legislative agenda for the Mortgage Bankers Association, with one of the MBA’s leaders saying the trade group is “very close” to winning that battle in Congress.

The Effects of the Tax Credit So Far

Nationwide, pending home sales have been on the rise for seven months in a row, according to the National Association of Realtors.  But just as auto sales dropped sharply once the government’s Cash for Clunkers program ended, real estate pros are bracing for a letdown if this tax credit disappears.

The IRS estimates that 1.4 million taxpayers have utilized the program.  At these numbers, the total cost of the tax credit is slightly over $11 billion or less than 4% of the overall stimulus package (didn’t AIG get about fifteen times that???).

What’s Next?

Who knows at this point? At least 20 bills have been drafted in Congress regarding the credit. Some proposals would not only extend the first-time-buyer credit into next year but would expand it to include all buyers, remove income restrictions and raise the maximum value of the credit as high as $15,000.

The House of Representatives unanimously passed a bill that calls for a one-year extension of the first time homebuyer tax credit for service members serving overseas.

I think the credit will be extended one way or another.  Houses are about the last thing we build in this country, so we gotta keep that going, right?  Of course, you never know Washington.  It’s about as consistent as our UH Football team.  Go Bows…um, Warriors!  The only way to be sure you can capture that credit is to put in your offer today, time is running out!  Just kidding, despite the deadline, buying in a rush is probably not the best decision you could make.

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With our main mission of educating Veterans about their VA Loan benefits, it just seemed right to be apart of helping a great charity like the Wounded Warriors Project. The whole purpose behind the Wounded Warriors Project is help wounded and disabled soldiers coming home from Iraq & Afghanistan. With the funds raised by this charity, the Wounded Warriors Project has the ability to “raise public awareness about their needs, to help wounded warriors help each other, and to deliver unique programs to ensure that this is the most successful, well adjusted generation of wounded veterans in our history.”

Hawaii VA Loans was honored to support this event by giving a monetary donation as well as donating bottled water to all the participants who did the “Fight Gone Bad” workout.

CrossFit Oahu did such a great job, it raised over $12,000 at this year’s event. Nationally, through all the CrossFit affiliates across the country, “Fight Gone Bad IV” raised over $1,000,000 in 2009 for both the Wounded Warriors Project and Athletes for a Cure and we are glad we were apart of it.

More about what the “Fight Gone Bad” workout consists of from the from their website: www.fgb4.org:

In this workout you move from each of five stations after a minute. This is a five -minute round from which a one-minute break is allowed before repeating. The even is in the 3 round format. The stations are:

• Wall-ball: 20 pound ball, 10 ft target. (Reps)
• Sumo deadlift high-pull: 75 pounds (Reps)
• Box Jump: 20″ box (Reps)
• Push-press: 75 pounds (Reps)
• Row: calories (Calories)

The clock does not reset or stop between exercises. On call of “rotate,” the athlete/s must move to next station immediately for good score. One point is given for each rep, except on the rower where each calorie is one point.

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Buying a house is the most important, and often the largest, financial transaction most people will make in a lifetime. You want to make sure that you have an expert helping you through the process. If you don’t know a Realtor, there are a few items to think of when finding and selecting one. The next few paragraphs should help you through the process.

How Do I Begin Finding an Agent?

The first thing you want to do is ask around. Word of mouth may be the very best way to pick a realtor. Talk to everybody you know about the realtor they used and if they would use that realtor again.

If you are new to the area and are unable to find any referrals, there are several ways to go about finding a realtor you like:

1. Open Houses: The easiest way to meet multiple real estate agents within a short time is to visit open houses in the area in which you are interested in purchasing. Within an afternoon, you can have five to ten short conversations and be introduced to a variety of realtors and real estate companies.

2. Go Local: You may want to select a local real estate office with a good overall reputation. Most local newspapers or periodicals have a ‘best of’ list or some type of consumer based recognition system. Google “best of [your city]” and you’re sure to come up with a number of lists.

3. Big vs. Small: Try contacting a mix of local real estate offices. Different types of offices can offer different benefits. A nationally known company comes with an established reputation, requirements and procedures while smaller, individual companies are often opened and managed by successful and experienced real estate professionals familiar with their local market.

Contact the office, and let them know what you are looking for (general area, price range, your family status). They should be able to match you with an agent from within the office. If you are proceeding this way, you may want to call several offices and make appointments with a number of agents. Let them know your goals in terms of housing desires, budget and time frame. These appointments will help you to learn more about the personality of each agent as well as how comfortable you are with them.

I Have Met Some Agents, Now How Do I Choose?

Now that you have an agent or several agents to begin talking to, you may want to have a conversation with them to help determine if they are a good fit for you & your needs. Can they ascertain or help you identify your priorities? Ask for some suggestions on properties currently available. These discussions will help you to learn more about the personality of each realtor as well as how comfortable you are with their suggestions.

Following are some things to take into consideration:

1. Does the Agent Listen to Your Needs?: Does the agent listen carefully and respond appropriately to your stated price range or do they attempt to sell you something bigger or more expensive?

2. Knowledge & Communication Style: The realtor should take the time to explain things you might not understand. Real estate transactions can be complicated and the terminology confusing. You need an agent who will both know the answers to your questions and takes the time to explain them.

3. Experience: Ask about the agent’s experience; how long have they been in the business? How long locally? How many people have they helped purchase a home? Don’t be afraid to ask for references, a good agent should have past clients that would be happy to put in a good word for them. If an agent doesn’t have much experience, but you like and trust them, then ask to meet their broker-in-charge. That is the managing realtor that is ultimately responsible for the action of all the agents working for him or her. Make sure the primary broker will be available for help or guidance once you decide to submit an offer and throughout the rest of the transaction.

4. Time Flexibility: This may seem trivial, but make sure you choose an agent who works on your time schedule. If you can only look at homes on Sundays and your agent doesn’t work that day, it may be best to look elsewhere.

5. Personality: You want your agent to be bright, professional, responsive, and someone who works in the business full-time. It is also important to make sure that the realtor has a personality you like. You’re going to spend a lot of time with this person. If your personality clashes with your realtor’s, chances are you aren’t going to have a very pleasant home buying experience. You want to have someone who you can talk to when there’s a problem. Someone who clashes with you or communicates with a totally different style could be a challenge to work with.

6. Neighborhood Expertise: If you know that you want to look in a particular area, find a realtor with local knowledge and who commonly deals with properties similar in price range and area. There are often nuances of an area that only a realtor who commonly works there would know. For example, does the street get a lot of traffic, how is the local park at night? Is there new development planned, how is traffic in the early morning or late afternoon, etc…

Some Final Considerations

You may see a house you like in an advertisement or on the internet and simply contact the listing agent. It is very important to understand that, depending upon state laws, the seller’s realtor may be obligated to represent the best interests of the seller, and not you, the buyer. This could mean that they must pass on any information you provide them to the seller. So, you’re probably better off finding a real estate agent that represents only you for the transaction.

Lastly, you should never feel pressured into buying a home you aren’t completely comfortable with. A good realtor isn’t just in the business of selling homes, they are in the business of keeping their clients happy.

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First of all, what are escrow impounds and why should you care? Escrow impounds (often just called ‘escrows’ or ‘impounds’) are fees collected by the lender at closing and then each month in order to pay third party bills on your behalf. Lenders do this to ensure important bills are paid and to help budget for these payments because they are due in lump sums which are often quite large. The homeowner pays these fees each month and the bank holds them in a separate ‘escrow’ account and pays the bills when due.

Typically, for single family homes, the impounds cover the insurance and property tax bills. For condos, insurance costs are paid by the condo association and the condo fees are paid monthly by the homeowner to the condo association, so impounds solely cover property taxes.

Taxes are typically due twice a year, while insurance is paid annually. The lender does not charge for this service and often requires it. For all government insured loan programs (FHA, VA and USDA), impounds are required. For conventional loans, many lenders require it and will charge a fee of 0.25% if a borrower wants to manage these payments on their own. For a $400,000 loan that becomes a cost of $1000.

Escrow Impounds vs. Escrow Fee

It’s important not to confuse this with the “Escrow Fee” associated with a loan transaction itself. That fee is charged by the escrow company for their services during the transaction. It is also a VA Non-allowable fee which means that a veteran is not allowed to pay that fee. However, all FHA, VA, USDA borrowers must pay the impound fees at closing and each month thereafter.

Budgeting for Escrow Impounds

Escrow impounds become very important when you are budgeting for the purchase of a new home. For a single family home, one full year of hazard insurance (fire, hurricane, flood, etc…) is due at closing and an additional three months are collected to establish reserves for the next year’s payment. Depending upon the size and location of your house that amount can be anywhere from $750 to $2000 or more at closing.

Regardless of the type of home you are buying, property taxes must always be paid. In most counties, taxes are paid in two installments. So, depending upon what month you are closing, you may have to prepay anywhere from three to eight months of taxes at closing to the lender. In addition, you must reimburse the seller for the taxes he/she has already paid on the property for the upcoming months. In Honolulu, taxes are collected in mid-August and mid-February. For example, if you close in April, the seller had already paid the taxes due in February and covering through August. You will reimburse the seller for May, June and July because he/she has already prepaid, but you will be living there.

All-in-all, you will always need to come in with approximately nine months of taxes at closing (Below is a chart to illustrate this). When purchasing a Single Family Home, make sure to also budget for the 15 months of Hazard insurance due at closing. Good luck with your future home purchase and feel free call us with any questions or concerns you may have.

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